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GIFT  or 


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SEP     8   1919 


Federal  Stamp  Tax6s  on 

Drafts,  Checks 

and  Promissory  Notes 


1919 


Guaranty  Trust  Company 
of  New  York 


GIFT 


Federal  Stamp  Taxes  on 

Drafts,  Checks 

and  Promissory  Notes 


Imposed  by 
Title  XI  of  the  Revenue  Act  of  1918 


1919 

Guaranty  Trust  Company  of  New  York 

- 140  Broadway 

FIFTH  AVENUE  OFFICE       LONDON   OFFICE  PARIS    OFFICE 

Fifth  Avenue  and  43rd  Street        32  Lombard  St.,  E.  C.  Rue  des  Italiens,  1  &  3 

MADISONAVENUE  OFFICE       LIVERPOOL    OFFICE  BRUSSELS  OFFICE 

Madison  Avenue  and  60th  Street        27    Exchange  Buildings  158     Rue     Royale 


COPYRIGHT,  1919,  BY 
GUARANTY  TRUST  COMPANY  OF  NEW  YORK 


•  •    •  •  • . 


:.:.•:  ...GIFT 


•  "•'      •  •  •«•  , 


Stamp  Taxes  on  Drafts,  Checks 
and  Promissory  Notes* 

THE  Revenue  Act  of  1918  imposes  a  tax 
on  drafts  and  cheeks,  payable  otherwise 
than  at  sight  or  on  demand,  upon  their  ac- 
ceptance or  dehvery,  whichever  is  prior,  with- 
in the  territorial  jurisdiction  of  the  United 
States,  and  on  promissory  notes,  except  those 
listed  below  as  exempt,  and  on  each  renewal 
of  the  same.  The  term  "United  States"  in- 
cludes the  states,  the  District  of  Columbia, 
Hawaii  and  Alaska. 

The  tax  is  at  the  rate  of  2  cents  on  each 
$100  or  fractional  part  thereof.  On  amounts 
not  in  excess  of  $100  the  tax  is  2  cents. 

Any  instrument  or  writing  operating  as  a 
renewal  of  a  promissory  note  is  taxable,  but  the 
mere  suspension  of  payment  or  forbearance 
does  not  constitute  a  taxable  renewal  within 
the  meaning  of  the  law,  nor  does  pay- 
ment of  interest  on  a  demand  note,  without 
any  agreement  in  writing  extending  the  note. 

•Based  on  Treasury  Regulations  No.  55. 

[3] 

4-20057 


The  payment,  however,  of  interest  in  advance, 
after  maturity  of  a  promissory  note,  eviden- 
ced by  an  indorsement,  constitutes  a  taxable 
renewal. 

Liability  to  tax  and  the  amount  thereof, 
is  determined  by  the  form  and  face  of  a  check 
or  draft  and  cannot  be  affected  by  proof  of 
facts  or  instructions  outside  of  the  instrument. 
Payment  for  the  stamp  is  a  matter  for  ad- 
justment between  the  parties,  but  obligation 
rests  upon  the  drawee,  payee,  or  indorsee  of 
a  draft  to  see  that  the  tax  is  paid  before  or 
at  the  time  of  acceptance  or  delivery  and  both 
parties  to  a  promissory  note  are  responsible 
for  affixing  and  cancelling  stamps  in  the  re- 
quired amount. 

Checks  and  Drafts 

The  following  instruments  payable  other- 
wise than  at  sight  or  on  demand  are  included 
among  taxable  drafts  and  checks: 

1.  Trade  and  bankers'  acceptances. 

2.  Post-dated  checks  expr«essly  payable  after  their 
date. 

3.  Time  drafts  drawn  against  the  proceeds  of 
drafts  exempt  under  (4)  below. 

[4] 


4.  Drafts  stating  no  time  for  payment  which  are 
accepted  for  payment  at  a  certain  future  date. 

5.  Time  drafts  drawn  on  a  domestic  bank  for  the 
purpose  of  securing  money  to  purchase  goods 
to  be  exported. 

6.  Time  drafts,  not  covering  exports,  drawn  and 
delivered  or  accepted  in  the  United  States  and 
payable  in  foreign  countries. 

7.  Time  drafts  covering  articles  shipped  from  the 
United  States,  Hawaii  aiid  Alaska  to  the  Canal 
Zone,  if  such  drafts  are  delivered  within  the 
United  States,  Hawaii  or  Alaska. 

8.  Time  drafts  drawn  against  shipments  from  the 
Virgin  Islands,  the  Philippines  and  Porto  Rico 
into  the  United  States,  if  delivery  or  accept- 
ance of  such  drafts  first  takes  place  within  the 
United  States,  Alaska  or  Hawaii. 

The  following  checks  and  drafts  are  exempt 
from  tax: 

1.  Demand  checks. 

2.  Post-dated  checks  not  expressly  payable  after 
their  date. 

3.  Time  drafts  covering  shipments  to  the  Virgin 
Islands,  the  Philippines  and  Porto  Rico. 

4.  Time  drafts  directly  covering  exports  to  a  for- 
eign country,  and  constituting  an  inherent, 
necessary  and  bona  fide  part  of  the  actual 
process  of  exportation. 

5.  Time  drafts  drawn  on  domestic  banks  against 
export  shipments  delivered  to  the  first  carrier 
for  transportation,  covering  the  period  of 
transit  from  the  interior  point  to  the  seaboard, 

[5] 


6.  Drafts  drawn  abroad  on  a  foreign  drawee  with 
a  foreign  payee,  passing  through  a  bank  in  the 
United  States  in  the  course  of  collection  unless 
delivered  by  an  agent  of  the  drawer  to  an 
agent  of  the  payee  within  the  United  States. 

Promissory  Notes 

The  following  proniissory  notes  and  renew- 
als of  the  same  are  included  among  instru- 
ments taxable: 

1.  Notes  given  for  security  only. 

2.  Notes  payable  on  demand  or  after  date. 

3.  Promissory  notes  accompanying  mortgages  of 
joint-stock  land  banks. 

4.  Promissory  notes  secured  by  bonds  of  the  War 
Finance  Corporation. 

5.  Promissory  notes  executed  and  mailed  in  the 
United  States  to  a  payee  in  Canada. 

6.  Extensions  or  renewals  of  promissory  notes 
brought  about  by  extension  of  mortgages  by 
which  such  notes  are  secured. 

7.  Instruments  in  the  form  of  promissory  notes, 
representing  the  interest  upon  promissory 
notes,  not  included  under  (6)  below,  and  either 
separate  from  or  prepared  in  a  form  and  for 
the  purpose  of  being  separated  from  the 
principal  note. 

8.  Policy  loan  and  premium  extension  agreements 
containing  an  unqualified  promise  to  pay  a 
specified  sum  of  money  at  a  certain  date,  ex- 
cept where  the  sole  remedy  of  the  payee  in  case 

[6] 


of  non-payment  of  the  premiums  or  loans  is  to 
reduce  or  cancel  the  rights  of  the  insured. 

The  following  instruments  are  exempt : 

1.  Certificates  of  deposit. 

2.  Bank  notes  issued  for  circulation. 

3.  Promissory  notes  executed  and  mailed  in  Can- 
ada to  a  payee  within  the  United  States. 

4.  Promissory  notes  issued  directly  by  foreign 
governments  and  placed  in  this  country  for 
sale. 

5.  Promissory  notes  secured  by  certificates  of  in- 
debtedness issued  by  the  Director  General  of 
Railroads. 

6.  Coupons  and  interest  notes  which  are  attached 
to  a  principal  obligation  and  are  substantially 
repetitions  of  the  promise  to  pay  interest  con- 
tained in  the  principal  obligation. 

7.  Promissory  notes  secured  by  United  States 
bonds  or  obligations  issued  after  April  24, 
1917  or  secured  by  the  pledge  of  a  promissory 
note  which  itself  is  secured  by  the  pledge  of 
such  bonds  or  obligations.  Such  bonds  must 
have  a  par  value  of  not  less  than  the  amoimt 
of  such  notes  to  exempt  the  latter. 

Cancellation  of  Stamps 

Any  person  using  or  aflSxing  stamps  must 

so  deface  the  same  as  to  render  them  unfit 

for  further  use  by  writing  or  stamping  his 

initials  and  the  date  thereon  with  ink,  or  by 

[7] 


cutting  and  canceling  such  stamp  with  a 
machine  or  punch,  which  will  aflBx  the  initials 
and  date.  The  cancellation  should  not  so  de- 
face the  stamp  as  to  prevent  its  denomination 
and  genuineness  from  being  readily  deter- 
mined. 

In  addition  to  the  above,  stamps  of  the 
value  of  10  cents  or  more  must  have  three 
parallel  incisions  made  by  some  sharp  instru- 
ment lengthwise  through  the  stamp  after  the 
same  has  been  attached  to  the  document,  ex- 
cept where  the  stamps  are  cancelled  by  per- 
foration. 

Use  of  Cancelled  Stamps — Refunds 

A  stamp  affixed  to  an  instrument  and  can- 
celled cannot  lawfully  be  removed  and  at- 
tached to  another  instrument.  Refund  will 
be  made  by  the  collector  of  internal  revenue 
for  amounts  paid  for  stamps  used  in  excess 
of  requirements,  or  on  instruments  not  actu- 
ally effective  and  for  which  a  substitute  is 
prepared  and  stamped,  or  on  instruments  not 
subject  to  tax. 


[s: 


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